The Effect of Governance Forms on North American Airport Efficiency: A Comparative Analysis of Airport Authority vs. Government Branch

Abstract

This paper applies a stochastic cost frontier model to a panel of 54 major airports over 2002-2008 to examine how the two dominant governance forms of publicly owned airports in the United States and Canada, namely, operation and governance by a government (city, county, or state) branch, or by an airport authority, affect airport efficiency performance. Our key findings are (a) airports operated by an airport authority achieve higher cost efficiency (on average, 14% higher technical efficiency) than those operated by a government branch; (b) airports operated by a government branch have lower labor share than those operated by an airport authority; and (c) there is no statistically significant difference in the efficiency performance between airports operated by U.S. airport authorities and Canadian airport authorities.